Altiris Is Back From IPO Disaster

With debts mounting, sales struggling and cash running short, Altiris, a Lindon, Utah-based developer of systems-management software, needed a quick infusion of cash. Founded in 1998, the company was an offshoot of testing company KeyLabs (one of VARBusiness' labs-testing partners). Although it won rave reviews for developing an innovative software-deployment and upgrade product, its financial model and strategy seemed all wrong for 2002. Normally a company with Altiris' financials would avoid the capital markets and look to private investors for cash. But Altiris had already tapped local sources of funding and saw an IPO as a better answer.

Trouble was, the company's timing couldn't have been worse. The dot-com bubble had burst and business pages of leading financial magazines were heralding a new era of fiscal responsibility in the wake of corporate disasters at WorldCom, Adelphia and elsewhere. The odds for taking a money-losing venture public looked bleak indeed.

But that's not even the half of it. Altiris had plenty of things going wrong. For starters, its handpicked accountant, Arthur Andersen, was imploding thanks to a little problem called Enron. Furthermore, a rival with a similar business model and focus on life-cycle-management products, Peregrine Systems, was collapsing and staring at restating financial results. In the three weeks leading up to Altiris' IPO, Nasdaq shed several hundred points, spiraling downward from 1,800 to 1,500. And on the very day the company made its public debut, Goldman Sachs downgraded more than two dozen tech stocks. For Altiris CEO Greg Butterfield, it was the worst of times.

No wonder the company's shares, which Altiris hoped would fetch between $12 to $14 at the opening of trading, debuted at $10 and then quickly headed south. Ultimately, they hit bottom at $4.50 each. Butterfield recalls watching TV monitors in New York on the day of the IPO as the dismal news sunk in. "There I was in what was supposed to be one of the happiest moments for a CEO, watching a nightmare unfold right before my very eyes," he says.

Despite its problems, however, Altiris persevered. The IPO--though not the windfall once hoped for--nonetheless raised $50 million for the company. And the industrywide downturn in tech spending kept employees from defecting elsewhere: To this day, Altiris has not lost a single executive or developer from the team that took the company public. Defections would have killed Altiris, Butterfield now concedes. At one of the darkest moments in the company's history, following the IPO, he called a companywide meeting and reminded his colleagues that their employer still had a chance to make a significant impact in the industry. His inspiration: a scene from the movie Hoosiers in which actor Gene Hackman, who played a troubled but inspiring basketball coach, turns a ragtag bunch of high-schoolers into state champions.

"I remembered when Hackman had his team in the arena where the big game was to be played," Butterfield says. "He could tell his players were a little awestruck, so he takes out a tape measure and shows them that the rims were still only 10 feet tall." Butterfield convinced his team that their products were just as good no matter how the IPO turned out.

After that, things started going Altiris' way. Turns out the prolonged downturn in IT spending helped the company, whose products help CIOs save money on life-cycle management by helping them optimize their existing IT resources. In uncertain times, buying Altiris products seemed a pragmatic decision. No wonder sales in Q1 of 2003 increased 71 percent over Q1 2002. With momentum building, the company expanded internationally and built out its channel. And its stock? At press time, it was trading at around $23. One reason for Altiris' success is Butterfield's decision to position the company as the Switzerland of life-cycle-management software companies. Use bits and pieces from Microsoft, LANDesk or another company? No problem. With Altiris' modular approach, you provide additional functionality to your customers almost on the fly. That approach has attracted top-drawer customers including Pfizer. With more than 200 high-end VARs onboard (and potentially several thousand smaller ones in the pipeline, thanks to a deal with Ingram Micro) the company has surprised more than a few doubters, including this one.

The future? Possibly some acquisitions--Butterfield is looking at three companies now--and some new initiatives around higher-end systems integrators. In the meantime, Butterfield is looking a lot like the kid who sunk a 50-foot shot at the buzzer to win the big game.